February 26, 2024

Strategic evaluation and control

Strategic evaluation and control

Strategic evaluation and control is defined as a process of estimating the effectiveness of a strategy in achieving the organizational objectives and taking corrective actions whenever required.

Strategic evaluation is an important part of strategic management as it checks whether the strategy implementation is going in the right direction or not.

Strategic evaluation

Strategic evaluation is the last step of the strategic management process, and comes after the formulation and implementation of strategy.

Strategic evaluation is defined as the process of assessing the efficacy of the strategy in achieving the organizational objectives. In other words, strategic evaluation checks that whether or not the strategy that was selected and implemented has met the organizational objectives. It can be regarded as the performance appraisal of organizational strategies.

It answers the following questions:

  • Are the objectives and plans formulated by the organization appropriate?
  • Has the business grown or not?
  • Has normal profit been achieved by an organization?
  • Has the strategy guided the organization towards its objectives?
  • Do the obtained results conform to the predetermined time schedule?
  • Are the resources being allocated and utilized properly?
  • Is there any need to change the strategy?

Importance of Strategic Evaluation

Strategic evaluation helps an organization to progress in a particular direction of success and growth. The importance of strategic evaluation is as follows:

  • Getting Feedback, Appraisal, and Reward: Helps measure the performance of employees in attaining organizational goals. In strategic evaluation, the feedback of employees is taken to perform the appraisal and good performance is rewarded to motivate them. If a gap is found in employees’ actual and desired performance, training and development programs are provided.
  • Verifying the Strategic Choice: Checks the validity of the strategic choice. The strategic evaluation process ensures that the selected strategy is in line with the objectives of an organization.
  • Checking the Link between the Decisions and Strategy: Maps the decisions taken by the strategists with the strategic requirements. The strategic evaluation process ensures that the final decisions taken are coordinated with the strategies to achieve organizational effectiveness.
  • Ensuring Successful Strategic Management: Ensures efficiency in the strategic management process. An efficient and successful strategic management process helps the organization in meeting its objectives.
  • Further Planning of Strategies: Helps in conceptualizing and designing further strategies. Thus, it can be said that strategic evaluation acts as a base for new strategies

Participants in the Strategic Evaluation Process

In an organization, strategic evaluation is done at all the levels to know whether or not the results match with the defined organizational objectives. In general, all members take part in the process of strategic evaluation; however, a major role is played by the following participants:

  • Directors: Enact the official role of reviewing and screening the executive decisions.
  • Chief Executives: Take the responsibility for all the administrative aspects of the strategic evaluation and control process
  • SBU heads: Facilitate strategic evaluation at their respective levels and divisions.
  • Financial Controllers: Help in the operational controls that involve budgeting, reporting, and financial analysis.
  • Executive Committees: Take the responsibility of regular screening of the performances of the employees with the set standards.
  • Middle Level Managers: Help in providing the information and feedback regarding the performance of employees. These managers get the directions from the top management for taking the corrective action.

 

Strategic Control:

 

  • Strategic control take into account the changing assumptions that determine a strategy, continually evaluate the strategy as it is being implemented and take necessary action and steps to adjust the strategy to the new requirement.
  • Strategic control regularly monitors the changes occurring inside and outside an organization to update the strategies as per the required changes.
  • The time gap between the formulation and implementation of the strategy may be substantial. It may be possible that the assumptions made while formulating the strategy change at the implementation level due to changing organizational and environmental conditions.
  • Strategic control focuses on looking at these changes and taking the necessary steps to adjust these changes to the strategy.
  • In addition, they help in knowing whether the strategies are working as expected or not.
  • Strategic control also involves looking at the solutions for the organizational problems by forming strategic control systems.

 

These systems can be formed by performing the steps shown in Figure below.

Process of strategic control

Process of strategic control involves the following steps:

 

  1. Establishing Sub-goals: Implies dividing the strategies into standards and targets, so that a strategy can be evaluated easily
  2. Creating Measurement Systems: Involves creating the procedures or techniques for measuring the performance
  3. Comparing the Actual Performance: Involves finding the gaps between actual and desired performance,
  4. Initiating the Corrective Action: Implies taking an action to cover the gaps

 

Types of strategic control

 

  • Premise Control: Helps in recognizing the changes in the assumptions of a strategy. Any change in an assumption of strategy may affect the organization’s success. Thus, premise control helps in regularly testing the assumptions with the changing environment and taking corrective actions if required. In other words, it can be explained as a control that helps in identifying the key assumptions of the plans and gathering the data to monitor the changes. Premise control helps in testing the foundations of the strategy and determining the validity of these foundations with respect to the present condition of the

organization.

  • Implementation Control: Focuses on evaluating the plans, programs, and projects that have been developed during the implementation stage. Plans, programs, and projects are evaluated to check whether or not they are contributing to the organization’s objectives. It analyzes the output to identify the gaps between predefined standards and actual performance, and takes corrective actions if needed. The two types of implementation control are as follows:
  • Monitoring Strategic Thrust: Involves controlling the projects that represent the actions that need to be taken if the overall strategy is to be fulfilled. It helps an organization to know whether continuing the strategy would be appropriate or not
  • Milestone Review: Implies identifying the milestones that will be achieved during the implementation of a strategy. Milestone reviews involve taking a small pause in between a project to ensure that the work done till now is completed successfully.
  • Strategic Surveillance: Refers to a general type of control. It monitors the changes happening inside and outside the organization with the help of available information sources, and identifies those changes or events that may affect the organization’s strategy. Strategic surveillance is sometimes confused with environmental scanning; however, there is a difference between the two. Table-1 shows the difference:
  • Special Alert Control: Refers to the type of control that discovers critical situations. Special alert control provides a mechanism for rapid response to a problem by forming contingency strategies. These strategies are created in advance to deal with business uncertainties. There are numerous organizations that form crisis management teams to implement special alert control.

 

The criteria for effective strategic evaluation

  • Minimum Information: Implies that a control should involve minimum information, since too much information may lead to ambiguity. There should be a balance between complexity and simplicity.
  • Timely Action: Implies that corrective actions should be taken on time. Performing strategic evaluation too early or too late may not be apt.
  • Term Controls: Imply that the controls should be long term because a strategy has a long-lasting impact on an organization.
  • Counting the Important Activities: Results in effective evaluation. The activities that do not contribute to achievement should not be emphasized much as they make the strategic evaluation process ineffective.
  • Rewarding the Effective Performance: Motivates the employees. If the performance of employees is equal to or more than the standards, the employees should be rewarded. The penalties for low performance should be minimized as it may demotivate the employees.

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